Nazara Technologies Ltd

NSE:NAZARA

Earnings Call Transcript 2024-Q4

[Operator]

Ladies and gentlemen, good day, and welcome to Nazara Technologies Limited Q4 and FY '24 Earnings Conference Call hosted by JM Financial. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Abhishek Kumar. Thank you, and over to you, sir.

[Abhishek Kumar, analyst]

Thank you. Good morning, everyone. Welcome to this call to discuss fourth quarter and FY '24 results for Nazara Technologies. We have with us the management team of Nazara, represented by Mr. Nitish Mittersain, CEO and Joint Managing Director; Mr. Sunil Kamath (sic) [ Mr. Sudhir Kamath ], Chief Operating Officer; Mr. Rakesh Shah, Group Chief Financial Officer; and Ms. Anupriya Sinha Das, Head of Corporate Development. With that introduction, let me now hand over the call over to Nitish for his opening remarks.

[Nitish Mittersain, executive]

Good morning, everyone. Let me start with a summary of our performance for the financial year ending 2024. FY '24, our revenue from operations increased by 4.3% year-on-year to INR 1,138 crores. We saw EBITDA growth of 16.5% to INR 128 crores with our EBITDA margins improving by 110 basis points to 11.2%. Our PAT from continued operations grew by 41% to INR 89.5 crores. And most notably -- And what is important for us, our operating cash flows increased to INR 131.4 crores, reflecting the company's strong underlying fundamentals.

This year, we have raised successfully between the present entity and our subsidiaries, INR 950 crores of equity capital, marking our largest fund raise to date and resulting in a net cash balance of approximately INR 1,450 crores. We took many key initiatives this year. It includes our new publishing platform, new game launches, IP partnerships and a strong M&A pipeline, and many of these are expected to yield results in FY '25 and beyond.

Our subsidiaries have been successfully executing our M&A strategy notably, Absolute Sports, which runs Sportskeeda acquired pro-football network in March '23 and has doubled the business of this company and turned it profitable. Next, we recently acquired UTP, a casual card game and Nodwin Gaming has acquired Comic Con India, which is a very popular new IP. In 2024, we have taken significant steps to lay a foundation for accelerated growth in coming years with a target of achieving an EBITDA of at least INR 300 crores in FY '27.

We have -- we are optimistic about FY '25, anticipating faster growth in both revenue and EBITDA and the impact of many of our initiatives should be visible from Q2 onwards with substantial cash reserves and a strong M&A pipeline, we are well positioned to seize further growth opportunities and enhance our trajectory through strategic M&A over the next 12 months. With that, I now hand over the call to Anupriya, our Head of Corporate Development for further business highlights. Thank you, and over to you, Anupriya.

[Anupriya Das, executive]

Thank you, Nitish. Good morning, everyone. I hope I'm loud and clear. Nazara operates across 3 business segments: Gaming, eSports and Adtech. We are well diversified across demographics, geography and business models. In FY '24, Gaming contributed to 36% of our revenues and 53% of EBITDA. - while eSports contributed 55% of revenues and 41% of EBITDA. Adtech accounted for the remaining share. Gaming, which includes Gamified Early Learning, Skill-based Real Money Gaming, Freemium and Telco subsegments.

This segment's revenue remained stable compared to FY '24, while EBITDA grew by 13% with margin expanding to 19.9%. Within Kiddopia -- within Gaming, Kiddopia, the FY '24 revenue was stable, while EBITDA grew by 57% year-on-year. Q4 revenue declined by around 12% to INR 60.9 crores, while EBITDA increased to INR 11.7 crores. The flat revenue but higher EBITDA reflects strong core profitability maintained -- as we maintain tight control on user acquisition spending. We are exploring growth opportunities like IP licensing to expand the game beyond current user acquisition efforts. Lower user acquisition spending led to a higher rate of subscriber base decline in this quarter, while ARPU increased by around 1% quarter-on-quarter in Q4 FY '24.

Moving to Animal Jam. FY '24 revenue was INR 95 crores with EBITDA of around INR 19 crores. Q4 revenue increased by around 7% to INR 24 crores with EBITDA growing to INR 2.9 crores. Q4 revenue was bolstered by the success and monetization of Wishing Coins, which is well introduced in Animal Jam enhanced player engagement. WildWorks is exploring integrating popular IPs into Animal Jam to drive user acquisition and is also working on a major new game set to beta launch in FY '25.

Moving to World Cricket Champion, FY '24 revenue was around INR 22 crores with EBITDA of around INR 4 crores. Nextwave planned to launch new games within Q1 to expand beyond its current scale. Openplay, FY '24 revenue and EBITDA stood at INR 37.4 crores and INR 2.1 crores, respectively. The new GST regime since October '23 has impacted the entire real money gaming industry's profitability. Our focus has been on improving operating efficiencies through new product launches and cost optimization. We are exploring consolidation in the R&D space following regulatory clarity.

Our eSports segment grew by 19% year-on-year in FY '24 and 6% year-on-year in Q4 FY '24 while EBITDA grew much faster by 51% year-on-year in FY '24 and 71% year-on-year in Q4 FY '24. Moving to Nodwin. The Q4 revenues decreased by 9% to INR 99.1 crores, while FY '24 increased by 10% year-on-year to INR 427 crores. During FY '24, Nodwin raised INR 90 crores from strategic investors and made several acquisitions, including Comic Con India, Publishme, Ninja, Freaks 4U, which is an investment, Branded and the IP related to Playground. These investments are part of a broader strategy to dominate the esports and youth media space. The financial impact from these acquisitions will be reflected in FY '25 and beyond.

SportsKeeda reported a robust year-on-year revenue growth of 60% to INR 196 crores in FY '24 and 71% year-on-year growth in Q4 FY '24 to INR 49 crores. EBITDA grew by 67% year-on-year to INR 65 crores in FY '24 and by 67% to INR 13 crores in Q4 FY '24. SportsKeeda's subsidiary Pro Football Network acquired in April 2023, reported revenue growth of 112% year-on-year in Q4 and has been profitable [ for each one since ] September 2023.

Adtech, FY '24 was a reset for Datawrkz as we shifted focus from lower-margin clients to high-margin clients and product business. This strategy pivot resulted in a revenue drop from INR 153 crores in FY '23 by INR 104 crores in FY '24. Gross margins improved from 19% in FY '23 to 27% in FY '24. We continue to invest in product development and increased marketing efforts, especially in the U.S., expecting these investments to show results in FY '25. This led to a decrease in EBITDA margin from 8.8% in FY '23 to 8% in FY '24. With this, I conclude my remarks, and we will now open the call for Q&A. I invite Nitish, Sudhir and Rakesh to join me for this session.

[Nitish Mittersain, executive]

Thanks, Anupriya, We'll have Sudhir, Anupriya, Rakesh and myself answer all the questions you may have. So let us please start.

[Operator]

[Operator Instructions]

The first question is from the line of Deep Shah from B&K Securities.

[Deep Shah, analyst]

Just the first question is around eSports. So -- this quarter, we really didn't have any game ban impact, neither did we -- and also, we had a favorable base because I understand BGMI was banned in the base water. Now could you help us understand the organic Nodwin, the eSports piece because if we remove brand scale, deconsolidation, what is the net impact? And ideally, we were thinking at -- this is a business which to grow much faster, right, maybe 20%, 30%. So if you can help us understand what is happening there? That's my first question, and then I'll ask the second question later.

[Nitish Mittersain, executive]

Sure. Let me answer that. So basically, I think what we have found is that with games getting unbanned, many of the properties are coming back. However, there is a lag effect. So we expect much of the upside or the reflection of these games coming back to be seen in FY '25 versus FY '24. I think the other side, especially on media rights, FY '24 second half has not been a great time because of everything that's happening in that world.

The OTT players, given the start-up funding crunch have struggled to raise capital and therefore have kind of slowed down media spends and also everything that's going on with the TV channels and the large media companies has kind of slowed down that process. But that said, we personally expect FY '25 to come back very strongly on eSports and are very bullish.

We've seen also some good signs. For example, our Playground IP is really taking a strong footing. We've seen, I would say, Season 3 doing very well. We're also seeing now international demand for that IP. So I think -- on the whole, we are feeling very optimistic that FY '25 will be a much stronger year for eSports given everything we have done in FY '24.

[Deep Shah, analyst]

Right. So just a follow-up there. So we had some plans of having international tournament. So any update on that? And the second follow-up is the fact that you alluded for the stagnation or sluggish media revenues, they are unlikely to go -- they are likely to remain for foreseeable future, right? So -- if we have the viewership and we have the kind of players, then we should be able to get away despite these problems. So I was just trying to understand that with BGMI the kind of traction we see on the ground, it seems very difficult to say that no OTT player or rather the kind of viewership we can generate, that we are not able to win media deals. So one on the international fund. And second, this changing? What is that catalyst which will lead to this change?

[Nitish Mittersain, executive]

Sure. I think on the international front, we are definitely making large moves. If you would have seen in the last quarter or I think this was December quarter, Nodwin made an investment in Freaks 4U, which is the largest esports player tournament organizer in Europe -- and along with that team, there are a lot of international activities going on, which you will keep hearing in the coming quarters and we especially see a lot of expansion in international activity in FY '25 on the esports side.

I think you are right in terms of the ground level activity. And like I referred, we've seen Playground do very well for us. We are hopeful that the other tournaments in FY '25 will scale in terms of user base, in terms of audience, and we will break through the glass ceiling of where the media rights are at this point of time. That said, our FY '25 growth numbers are not entirely subject to media rights. We are seeing many other monetization opportunities. And therefore, feel that we will grow a lot more than what we have grown in FY '24 on the esports side -- on the Nodwin side.

[Deep Shah, analyst]

Okay. Fair . The second question is on the Adtech business. So I fully understand the challenges in U.S. and it's actually credible what you have done in terms of focusing on better customers. But where do we see this process stopping? And then we're reverting back to growth because at every stage, you have customers who are lower margin vis-a-vis our Branded margin, right? So even today, you will have some customers who will be lower than your reported gross margins. So when do we see this revenue declines, margin optimization process [ top ] and then growth returning with stability in margins.

[Nitish Mittersain, executive]

We are betting that Q2 onwards of this year, we should be able to achieve our growth status on the Adtech. I think, again, we have done a lot of groundwork there. and FY '25 should bounce back on good growth, both in terms of revenue and EBITDA.

[Deep Shah, analyst]

Okay. If I can just squeeze one more. On the Kiddopia front, we've seen elevated levels of churn, about 7% monthly churn, which practically means that since we took the tariff hike to $8, about 60% of our customers would have churned out. And then because we've net lost [ 60,000 ] customers, about 120,000 would have coming as fresh, but we haven't really seen ARPU trends improving. So if it could help us understand what's happening there?

[Nitish Mittersain, executive]

Yes. Sudhir, do you want to take that?

[Sudhir Kamath, executive]

Sure. So I think partly, the churn that you see is actually the net churn, not the churn from the previous company. It is -- so it's not actually correct to say only old users are churned. It also happens that you have trials which have come in and people who then after a month or 2 months have continued. So the churn is the net effect. And the older customers do still continue on the older price point. So partly it's that. Partly also -- there will be periodic small discounts, et cetera because of which ARPU doesn't translate fully. So I think that's the basic reason. But overall, if you see the last few quarters, you would see there is an upward trend on ARPU, and we expect that to very much continue.

[Deep Shah, analyst]

Okay. Maybe I'll take this offline.

[Operator]

[Operator Instructions] The next question is from the line of Abhishek B from ICICI Securities.

[Abhisek Banerjee, analyst]

You see, first, is there any clarity now on the acquisition pipeline? I think Anupriya made a comment about awaiting regulatory clarity on RMG. Does that mean only when the government comes -- I mean in terms of clarity, they have already provided, right? Are you trying to wait for a reversion of the GST rates?

What is the thought process there? And in terms of segment other than RMG in the gaming space, are you looking at any acquisitions there? And what would be the time line, if any?

[Nitish Mittersain, executive]

I will answer that. So I think clearly M&A is a top priority for us. We have a very strong team that we put together, especially in FY '24. And we've done a lot of activities to build a strong M&A pipeline, which includes, for the first time, really going out very aggressively globally, participating in a strong manner in -- for example, Game Developers Conference in the U.S., which is the largest gaming conference in the world, and making our name out there. And it has been taken with a lot of great response, I would say. People are looking at Nazara as really potential consolidator of their businesses, not only in India but also in markets like the U.S., which shows up very good opportunities to us.

In the last few months, we've been in advanced conversations with many companies. At this point of time, we at least have 4 to 5 ongoing diligences with various companies and we hope to get at least a couple of them across the finish line by Q2 of FY '25. In terms of focus areas, one key focus is core gaming IPs, very similar to what we did with WildWorks and Animal Jam, which is playing out pretty well for us, and we think we can double down over there.

Especially with new technologies like AI, we think there's a lot more that these studios can produce, and we can take advantage of that. So we've kind of started working a lot on AI to create a playbook that can really scale up the studios once we acquire them. So I think that's one area of strong focus for us.

On the RMG side, we are not waiting for any regulatory clarity. Like you rightly mentioned, GST is already quite clear going forward. And we are actively in conversations with a couple of large players in that space to do something.

[Abhisek Banerjee, analyst]

Understood. Any idea of what is the time line on that?

[Sudhir Kamath, executive]

On the RMG, I don't have a definitive time line at this point of time. But on the gaming studio acquisitions, I would definitely expect that we are able to pull something over the finish line by Q2.

[Abhisek Banerjee, analyst]

Okay. And sir, just in terms of the gaming studio part, -- in the past also, we have seen acquisitions such as, say, WildWorks doing very well. However, [indiscernible] kind of scale, especially in developed markets, the revenue growth then becomes a challenge as we are now seeing for Kiddopia. So are the new acquisitions that you're looking for going to be more India-centric -- or will it be U.S.-centric for that matter?

[Sudhir Kamath, executive]

Gaming studio acquisitions today are more Western market focused, I would say, while they can definitely be also launched in India. But from a monetization perspective, they'll be U.S.-focused. We expect whether it's Kiddopia, whether it's Animal Jam, we are trying out many new ideas to break through the opportunity scale. I think the reason for our inability to scale has been more around the user acquisition, and we have a few ideas, including ongoing conversations with IP partnerships to kind of break through that.

So we are very confident that, that business can scale. And on the other hand, I think there are a lot of margin expansion opportunities after acquiring these studios. One is there is an India arbitrage opportunity. A lot of the work these studios do, while core product would still continue to run in the U.S., for example, a lot of the back-end work can be moved to India's expanding margins.

We also think that there's an opportunity over a period of time to save on some of the margins that we pay the platform providers. And the third, which I was talking about, AI, right? I think that is a game changer. And I think Nazara is really doubling down on how we are going to use AI, to one, optimize the studios as well as enhance their ability to engage with players, to analyze data, et cetera. And I think that could potentially be a game changer for us. So these are the 2 or 3 areas that we are very focused on deploying.

[Abhisek Banerjee, analyst]

Got it. Got it. So my next question is on the Nodwin Gaming part. And if I look at the media revenues number for the quarter, there seems to be an uptick just for Q4, if I see. About INR 20 crores you have done in Q4 vis-a-vis about 13 crores you have done in last year. And the content views also seem to be kind of catching up in Q4. So is that really right? Or do you still see material weakness in media revenues as of now?

[Nitish Mittersain, executive]

So Q4, you're seeing an uptick. One is, of course, with our Playground IP, like I was mentioning, we are in Season 3 and Playground has done very well for us. It has wide acceptance and the media channels are willing to pay for it. Sponsors are -- you've got great sponsors coming in. So I think that's been a breakthrough for us. And I think that's just a starting point because with Season 3, you have an IP that's now getting really established, and we expect that Season 4, season 5 should start seeing more nonlinear growth. I think the other thing we're excited about there is this is the first time, I would say, a potentially global IP has been created in India, on something that's really innovative on gaming and esports. And we are seeing demand now from many countries, different players to kind of either license this IP or co-produce with us. And that actually throws up the whole world open. So we think that this particular IP is very exciting for us. You've seen some reflection of that in Q4, and I think you will continue to see that in the years to come.

[Abhisek Banerjee, analyst]

I understood. And then just 1 final question...

[Operator]

Sir, may I request you to please rejoin the queue for the follow-up question.

The next question is from the line of Samarth Patel from Equirus Securities.

[Samarth Patel, analyst]

Yes. Just to expand on the Kiddopia point, the subscriber growth has been sluggish for several quarters now. So while we have attributed this to our strict [indiscernible] limiting marketing spend, how confident are we that the root cause is not in product or technology?

[Sudhir Kamath, executive]

See, our internal assess is really clear, that it's essentially around how much we're able to spend on the [ UA ] is the direct correlation between that and the number of subscribers. So product-wise, we think it's working just fine from a retention point of view of customers on how many convert, what is the activation rate, all of those metrics are holding just...

[Samarth Patel, analyst]

Okay. And additionally, can you please elaborate on the strategy for generating merchandising income through Kiddopia? And what plans are in place for this merchandising revenue stream, specifically for Kiddopia?

[Sudhir Kamath, executive]

Yes. So at this point, it is still a small revenue stream for us, but Captain Kidd, which is a character in Kiddopia is one that we want to expand further, especially in the U.S. market around all kinds of merchandise. It's still very, very small. So we're not breaking that number out at this point, but we will share more details in coming quarters. I think the broader strategy is to expand the IP base, which is used in the games that we have both in Kiddopia and Animal Jam. And there, it could actually expand both the core revenue as well as the ancillary revenues for the game.

[Samarth Patel, analyst]

Okay. That was helpful. Now just coming to Sportskeeda, can we expect the strong margin performance to continue into FY '25? Or should we anticipate some level of moderation in the margins going forward?

[Sudhir Kamath, executive]

We do expect actually that it will continue for a while longer still. The market in the U.S. is much larger than what we currently tap, even in terms of number of sports, Right now, we're still present in a couple of the smaller sports in a dominant way -- and we have a small position now in Pro Football, which is the largest sport there. We still have, I would say, limited presence or a smaller presence in the other main sports which are popular in the U.S. So we think there's a lot of room for growth. And we do expect the momentum to continue.

[Operator]

The next question is from the line of Rahul from Dolat Capital.

[Rahul Jain, analyst]

Yes. So a couple of questions here. Firstly, on the Animal Jam side, can you bit share about the new game launch that we are talking about? And is this nudging things which you have shared around the Wishing Wells and stuff? Is it something what the earlier management was not doing and this is enhancing the revenue potential for the business? Any color on these things would help.

[Sudhir Kamath, executive]

Sure. So I think with Animal Jam, there are 2 kinds of product developments which happen. One is there a content level update which goes out every quarter, sometimes maybe a couple of times every quarter. And that has kept happening. And you just introduce more discipline, put more resources behind that, and that has kind of continued to do well over the last few months and will continue in the next year as well. When you say new game, we mean something different -- which is an entirely new game being developed by the team. And that is something that we expect to take into alpha in about 3 to 4 months. and beta by the end of the year. So that will be a major development, not just an incremental thing within the existing game.

[Rahul Jain, analyst]

And 1 question for Nitish. To your comment that you would like to consolidate some of the gaming entities at the parent level, Will that essentially reduce the cash flow requirement for future acquisitions because then you would be generating a lot of cash at the top? And does it change your strategy towards acquiring gaming studios, which you were mentioning, which has very high ROCE business, but not necessarily maybe growing business? So any input on this overall thought versus would be great help.

[Nitish Mittersain, executive]

Sure. So I think what we are trying to really address is that if we are able to generate significant free cash flows at the parent level -- it gives us a lot of flexibility to reinvest this capital. As you can see in our current structure, most of our companies are generating good cash, but the cash gets stuck in the subsidiaries below, which is not a very efficient structure. So the way we are looking at approaching this is a hybrid approach where we start bringing in some of our core gaming IPs at the parent level. This would happen through either mergers of existing subsidiaries or direct IP purchase in new M&A that we do. And this will not be a deal-to-deal basis, it may be different.

But wherever possible, we will try and do this to bring the business directly to the parent level, that will give us a lot more flexibility. At the same time, many of our adjacent businesses of today, whether it is the eSports business, Sportskeeda business, Datawrkz, et cetera, will continue to operate as satellite businesses. And we may also make new investments and new acquisitions in that. So I think the only the core gaming IP business is what we will try and bring to the parent level. And we think that will be a very efficient way to move forward. In terms of buying high ROCE businesses which don't have growth or much growth, I think it finally depends on the value we pay for it.

But I think we would prefer to see businesses, one, that have clearcut sustainability of the business they are doing. And then we have some ideas in our own mind on how we can grow these businesses once we acquire them. Even if in the last year or 2 years, they have had muted growth. I earlier mentioned a few points where we are creating a playbook, and we believe we have a playbook that can very positively impact these businesses, both on margin expansion and growth. So that is the whole idea we are pursuing.

[Rahul Jain, analyst]

Appreciate the color. Just a follow-up on that part to your EBITDA outlook, which you have shared. Is it -- of course, this is very encouraging, but if you could try to explain a bit more in terms of what are the easy avenues for you to begin with, in terms of EBITDA expansion? Is it some kind of integration? Is it more about scaling up margin on the existing business? Or -- any way you would like to explain that?

[Nitish Mittersain, executive]

Of course. So I think for our existing businesses, we are going to continue to push for higher growth as well as higher margins. We believe that core gaming businesses should generate 25%, 30% kind of margins and there is enough room for us to increase our margins. So I think there's a lot of focus on that. And over the next year or 2 years, we are very confident of uplifting the margins. I also think some of our businesses like eSports, Nodwin, which are large revenue businesses, but not contributing a lot of EBITDA at this point of time, will actually start contributing better EBITDA and a few percentage point movement over there will make a significant impact on overall EBITDA in terms of absolute numbers. And lastly, of course, we believe that most of the acquisitions we will do will also be good EBITDA contributors to our business.

[Operator]

[Operator Instructions] The next question is from the line of Abhishek Kumar from JM Financial.

[Abhishek Kumar, analyst]

Nitish, my first question was on the M&A strategy. We have, in the past, acquisitions used our own equity as a currency as it kind of brings the founder skin in the game as well. Has that changed given so much cash on the book? Are we looking at all-cash deals? Or would it still be a combination of share swaps and cash? That's my first question.

[Nitish Mittersain, executive]

So I think there will be predominantly all-cash deals at this point of time. We want to reduce the amount of equity we show, unless it is really needed. Of course, if it's for incentivizing founders, we may consider some of it or we may find alternate ways to incentivize, including cash bonuses linked to performance, et cetera. So we're evaluating all options. But in general, I would say going forward, we are not keen to issue equity very easily.

[Abhishek Kumar, analyst]

Okay. I'm not sure if that kind of exposes us to the risk of founders leaving. I'm asking...

[Nitish Mittersain, executive]

No, I understand. I don't think so. I mean, look, for us, to do an M&A deal in our model, right, where we are not hands on running every operation, having the founders and management incentivized is the primary goal and we will not do any deal which does not allow for that. But that can be addressed through multiple structures. I'm not saying that we will not issue any equity. We would issue some equity, but those ratios may change. Or we may find alternate or better structures. But ensuring that founders and management teams are highly incentivized, is something that we are going to definitely prioritize in any M&A we do.

[Abhishek Kumar, analyst]

Sure. One related question is on our decision to acquire the remaining stake in World Cricket Championship. This property has not been doing very well. Any particular reason why we have decided to do that?

[Nitish Mittersain, executive]

So we brought in a CEO in the previous year, and we believe that we've done a lot of good work that should start reflecting in numbers pretty soon. We've also, in recent times, scaled up our marketing and starting to see good traction. We see some global expansion opportunities. We see platform expansion opportunities on consoles, PCs and other platforms outside of mobile. And we're also launching a brand-new game now in this quarter very shortly.

So I think while the IP has not performed as we would have liked to, in the last few years. I also believe that this value, it throws up a good opportunity for us to get in, take control of the entire business and drive it to the direction we want to. And I also think that AI is going to play a role here to drive it in the next year as well.

[Abhishek Kumar, analyst]

Sure. My last question is on the game publishing business. Obviously, it's very exciting. I just wanted to understand as a publisher and when we onboard various studios, what our role typically is? Are we going to advertise and do the user acquisition? And if that is the case, I was just wondering, given our focus is on the U.S. market for these gaming studios. Will the users that we acquire for these games as a publisher will also be based out of U.S.? Or would that be a more global kind of a clientele?

[Nitish Mittersain, executive]

So publishing for us -- Sudhir, you want to take it?

[Sudhir Kamath, executive]

Yes, let me take this one. So Abhishek, I think here, the primary focus for the publishing team is actually the India market. So we have essentially 2 kinds of studios that we are working with or intend to work with on the publishing side. One are the smaller Indie studios where maybe small Indie developers locally from India who may also target the U.S. market, that's actually going to be a smaller part of the overall publishing story. The biggest thing is working with larger studios, global ones who have already a big name, which is big globally, maybe kind of underexplored in India. They already have some revenue from India, but we believe that we can help them to scale it up much further. In that particular case, we would be spending our money on scaling up both the user acquisition, but also marketing, branding kind of spends, working with influencers, working with media, et cetera, to help those games scale up. And that will be I think the primary focus in the coming months is what you see.

[Abhishek Kumar, analyst]

And we are confident of monetization, given even WCC, which is the most popular game in India, right, cricket, monetization is a challenge when it comes to Indian users. So how confident are we that we can bring in the games, global popular games and we can still monetize them?

[Nitish Mittersain, executive]

The games which are monetizing where in India right now are either or better -- either on the RMG side or on the IP side. So you do have large global games which have the majority of their revenues coming from IP. Some of which have actually struck a good cord with Indian users and are generating in the millions of dollars, not just -- not small numbers, but reasonably sized numbers and which are growing. So those are the kinds of gains that we would want to target [indiscernible], not necessarily ad supported games only.

[Operator]

The next question is from the line of [ Manan Poladia ] from MKP Securities.

[Unknown Analyst]

So my first question is with regards to what the first participant asked on the Kiddopia thing. The subscriber growth really seems to have plateaued and you have spoken about how user acquisition, et cetera, has been a problem. Also my understanding was when we had acquired the ad tech platform, that is what we were going to use to solve our user acquisition problem. So if you could just give me some color on what is going on there? Are we realizing any synergies or what are we doing with the user acquisition piece over there?

[Nitish Mittersain, executive]

Sure. So on Kiddopia, firstly, I think the linear approach of trying to solve user acquisition clearly is not -- we're hitting kind of a dead end, right, which is very evident in the last few quarters. We've tried many things and it's not really improving. So we expect that the business to plateau if we are not able to break through, through an alternate route. What we are very bullish about right now is that by bringing in popular IP of known characters because these IPs and characters are very popular with kids, we should be able to -- we should be able to drive a lot more organic traffic, which kind of provides us scale and provides us with a much better blended cost per trial.

So we are in advanced conversations with many global popular IP holders. I don't want to name specific companies until we sign a deal. But I expect in the next quarter or so, we will definitely do 1 or 2 such deals, both for Kiddopia as well as for Animal Jam. And I think that can really be great. So I've seen a few other kids businesses in the U.S., which have been more IP-driven who have done very well despite the [ UA ] issue, and that's what we are trying to solve it the same way. The advantage we have is that both Kiddopia and Animal Jam are very widely appreciated by these IP holders in Western markets So it's easy for us to license from them. And we're not like an unknown player coming in and asking for these licenses. So we are currently betting that, that is going to be one way for us to break through. I think the overall business opportunity is still very large, but we need to do something different, and we are very much trying to do that currently.

[Unknown Analyst]

That sounds great. I look forward to seeing that happen. So my second question is on the Nodwin front. My understanding of channel tech tells me that there is some slowdown with respect to spending like you yourself mentioned -- and my understanding is also that there is some competition coming up, like specifically right now, the whole BGIS IP is going on, which, in my opinion, is a fairly big IP, right? And I am given to understand Tesseract, one of the competitors is running that specific IP. So if you could just give some clarity on the competition situation since Nodwin is the market leader there.

[Nitish Mittersain, executive]

Sure. I think competition is always good to be there. It keeps us on our toes. We think Nodwin is way ahead of the game at this point of time in terms of market share, brand awareness and partnerships at a -- so I think competition to a certain extent, will help expand the market. We are not worried about that. On the whole, we think the overall, the sports market should see a good expansion FY '25.

And Nodwin should be the maximum beneficiary of that. Nodwin currently has 80% market share. And I think that's a tough one to break through given the kind of partnerships and investors Nodwin today has.

[Unknown Analyst]

Right. So just a short follow-up. I understand that Krafton is an investor in Nodwin as well. And I get that, that would give us a decent chunk of that business. Also, the second on the Playground bit, I see that we have seen much better impressions, et cetera. I was just wondering if you are willing to give some breakdown of what sort of monetization we've gotten from that particular IP since we -- I think this is something we mentioned in one of the previous calls as well that we are focusing on monetizing our own IPs more than the white label IPs.

[Nitish Mittersain, executive]

Yes. I think the advantage of monetizing our own IPs, obviously, is that as the right increase rate, the profitability and margin contribution of these IPs would be significant. Season 3 had 24 million viewers. So I think we're starting to achieve a scale that is worth looking at. And a lot of sponsors as well as Amazon miniTV have come in again in Season 3 to generate significant revenues. I don't immediately have exact revenue numbers contributed, but I think they were at least 50% higher than Season 2. So I think, it's right in the right direction. And we are only talking -- remember, we only talk about India right now. I think Playground is an IP that can actually go global. And if you can take this IP into markets like the U.S., really speaking, sky is the limit. So we are very it.

[Operator]

[Operator Instructions] The next question is from the line of [ Kartik ], who is an individual investor.

[Unknown Attendee]

This is related to the comments that you made saying that AI as a game changer. I wanted to understand, recently, I think the text images and videos and audios with large language models. -- also with [indiscernible] sort of released that, right? So I wanted to understand a little bit more on what sort of -- where are you sort of applying this AI? And -- and also whether you have in-house [ newer ] network models to expand the gaming in Nazara?

[Nitish Mittersain, executive]

Yes, sure. So I think I can be leveraged in gaming in multiple ways, low-hanging fruits are, for example, creatives, right, whether it's creates for your fire games, whether it's design elements, whether it's creatives for user acquisition, et cetera, can be easily used. We are looking at automating, product testing through AI stress testing through AI, having AI characters compete with each other on our games to really see how the games kind of evolve and how players will engage.

So I think there are unlimited use cases of AI that we can deploy in gaming, both in terms of how the games are being produced, faster, better, more efficient as well as how we are using AI to do 2 more things: one is how does -- how do we throw all the data being generated by the players during their activity to the AI to make a lot more personalized offerings, which will help increase engagement as well as better monetization through advertising and user acquisition. So I think the analytics piece can be very powerful. And overall engagement of the user can be done in a far more better way.

Like I said, we are paranoid as well as excited about AI because we know it's moving very fast, and we need to be in the forefront of this. We have an AI task force internally that is focusing on many innovative ways of using AI, testing it out on a couple of our studios with an intent to create a playbook that can be replicated across everything else we do.

[Operator]

The next question is from the line of [ Rajkumar Vaidyanathan ], who is an Individual Investor.

[Unknown Attendee]

Just a couple of questions and 1 comment.

The first question is on the inorganic growth that you have been mentioning in the call. I just want to know, are we pursuing inorganic opportunities just because we have enough cash in the balance sheet or -- are we looking at -- I mean I just wonder what is the thought process behind passing an acquisition?

[Nitish Mittersain, executive]

I'm not sure I got it properly. Sudhir, did you got it, you take it.

[Sudhir Kamath, executive]

Yes, I think I got it. Thanks, Rajkumar. I think what you were asking was what is the rationale behind pursuing inorganic opportunity. Is that correct?

[Unknown Attendee]

Yes, correct. I just wonder -- I mean, what is -- like when you're looking at the growth in the next 3 to 4 years, -- so you're looking at more of organic growth or inorganic growth to meet your objectives?

[Sudhir Kamath, executive]

I think both will happen. Organic growth is definitely high on the agenda for -- and business specific, and we've broken that down in some of our discussions as where we expect a lot of uptick to happen in '25 and beyond. Inorganic will also happen. And I think to your question of why inorganic in the first place, I think clearly, when we look at each of these businesses, scale does matter. And as we continue to add IPs, for example, or ad tech on the gaming side, then we're also able to get significant synergies across them. We're also able to get significant cross-sell across games, which then helps us with the user acquisition side and so on. So there are definite advantages to scale here is what we see.

[Unknown Attendee]

Okay, okay. And the second question is when you do, when you pursue M&A opportunity, I just want to how do you keep the founders kind of motivated because I have seen in business that when you acquire the company, the founder generally leaves when the retention kind of gets paid out for a period of time. So what do you -- how do you think that you will keep the founders motivated? Because we are business people. So how do you think that they will accept the role of an employee from an entrepreneur unless you give a stake in the company?

[Nitish Mittersain, executive]

So let me take that. First of all, whenever we acquire a business, founders has had, one, significant stake in the business. Second, we never consider them as an employee of the business, right? They are founders running the business and in fact, largely have autonomous way of running the business. We support them in whichever way we can but it's a founder who runs our business, and we very much expect that.

In the past, I think we've seen good success of founders working with us, being able to accelerate the business significantly after joining hands with us. And at every step, we've tried to create liquidity for the founders at higher valuations. So founder can see that by creating value, we are able to monetize it themselves. And I think that playbook has worked quite well for us.

[Unknown Attendee]

Okay. That's great. And lastly, 1 comment. I think there are a lot of -- I can see that there are a lot of questions on EBITDA improvement and so on and so forth. But I know the promoters are more focused on the long term. So I just want to kind of reemphasize that point, you please stay focused on creating value for the company over the longer term despite the short-term P&L pressures. That's my comment...

[Nitish Mittersain, executive]

We appreciate that sentiment, completely agreed to it. And I can assure you that we are taking absolutely no decision with a short-term quarter-on-quarter pressure and only taking what we truly believe is the right decision for the company. Of course, we are -- we may be wrong sometimes, but we will take measured risks and only take decisions which we believe are truly in the interest of the growth of the company.

[Operator]

[Operator Instructions]

The next question is from the line of [ Nikhil ] who is an individual investor.

[Unknown Attendee]

Nitish, I hope I am loud and clear. Yes, so my question revolves around the promoter stake. So I just see read a news stating that the promoters have sold 6% of stake to the existing investors. I mean, what I understand is the current valuations of Nazara is at the lowest which I believe? So selling it at a lower valuation, which I thought the promoter should have been actively buying it for the long term.

So I just need your views on that.

[Nitish Mittersain, executive]

Sure. Look, it's important to understand that as a promoter family, right, we have been running this company for the last 25 years. And the way the company developed, we never had large amounts of liquidity in the past. So at some point of time, I think it was important to have for the promoter family to get some liquidity. And it's impossible, as you know, to get the timing perfect for this.

I think what is more important to understand are 2 points: one is the promoters will remain fully in control of the business. Myself, as CEO of the business remain fully committed, to running this business and taking it towards eventual scale. For me, it's not about capital. It's more about a legacy of 25 years, a dream that was about how India can become really big in gaming, and we continue to very aggressively pursue that.

I think the second point is Plutus has been an investor with us since the pre-IPO days. They initially put in a large amount of capital to purchase the stake. And I think we have also participated in future -- some of the placements that we did, including the latest one. And them now again coming back and buying this sizable stake, shows confidence in the company's growth prospects, in the promoters as well as the management.

[Unknown Attendee]

Yes. Another follow-up. So is it the case that since the these investors have bought the stake at a higher valuation for, they are keen to buy at this valuation so that they can average down. Is it the case?

[Nitish Mittersain, executive]

No, I don't think so. If we look at Plutus' capital -- capable, right, the way they've entered it, I don't think this is about averaging down. I think it's about taking a larger bet that this business will grow very aggressively in the future and they want to increase their stake to the extent possible.

[Unknown Attendee]

Okay. So the promoters will be around 10% to 12%, if I'm not wrong after this, right?

[Nitish Mittersain, executive]

Correct.

[Operator]

[Operator Instructions] As there are no further questions from the participants, I now hand the conference over to Mr. Nitish Mittersain for closing comments.

[Nitish Mittersain, executive]

Thank you, everyone, for joining the call.

Just to summarize, we have laid a robust platform for future growth, making us optimistic to deliver good results in the coming year and years, I should say. And on course to build Nazara as a global gaming company out of India to reckon with. Thank you very much again. In case of further queries, we request you to get in touch with us or Valorem Advisors, our IR firm. Have a good day.

[Operator]

On behalf of JM Financial, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.